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How Much Money Does a Billion iPhone Apps Get You? Not That Much

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Recently, Apple proudly strutted its feathers, pointing at the one billion iPhone free and paid apps users have installed on their little bundles of electronic joy. Now, the folks at LSVP have done the math and calculated how much revenue, approximately, that billion generated.

Short version: not that much.

Long version: Anywhere between $20 and $45 million; when you count in LSVP's approximation that the ratio of free to paid apps, is somewhere between 1:15 and 1:40, and O'Reilly's estimate that the mean price for paid apps is $2.65. Multiply these numbers and you get revenue of $70-$160 million; Apple's 30%, which is how much they get from each sold application puts their chunk of the cake at $20-45 million.

The lesson learned from these numbers, however approximate they may be, is that Apple is still primarily a hardware company; they sold 13.7 million iPhones and 22.7 Million iPods in 2008, which makes their profits from selling iPhone apps and even iTunes songs minor in comparison. However, iPhone apps are driving iPhone's overall significance as a platform (which ultimately reflects on sales), and thus, indirectly, generate far more profit. As always, for Apple the formula is 1. build hardware, 2. turn it into a platform, 3. profit.

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